There can be many reasons why a standard will would not meet your needs as well as a trust. Whether you would like to explore a revocable or irrevocable trust, avoid taxes, protect loved ones from squandering their inheritance, or provide for someone with special needs, estate planning attorney Steve Thienel can draft trusts tailored to your unique situation. There are numerous types of trusts, and the law allows you to craft minute detail in these estate devices.
Revocable versus Irrevocable Trusts
Both irrevocable and revocable trusts distribute assets outside of probate court, so you preserve your privacy and reduce some probate expenses. The obvious difference is that you cannot change an irrevocable trust, but you can change the terms of your revocable trust or revoke it entirely. You may wonder why anyone would have an irrevocable trust. It depends on your primary goals for your trust.
An irrevocable trust usually allows you to eliminate or minimize your estate taxes in exchange for sacrificing the ability to change your mind. Realize that, although irrevocable trusts can reduce your estate taxes, any income the trust pays out to you during your lifetime will typically be taxable. Sometimes the assets in an irrevocable trust cannot be reached by people who get a judgment against you in court. Not everyone is comfortable with giving up the right to ever change their mind, particularly if the tax code or state laws change, reducing the benefits of the irrevocable trust or creating new options.
Trusts Versus Wills
Both revocable and irrevocable trusts allow you to exercise much more control than you can with a will. A trust will allow you to serve as the trustee during your lifetime if you want, and designate someone else to take your place after you die. Your trust can schedule distributions over a period of decades. With a will, the probate court will set deadlines for the distribution of assets and for wrapping up the estate.
With a trust, you can set benchmarks for when your beneficiaries receive the fruits of your bounty. For example, you can stipulate that each of your grandchildren will get $50,000 when they earn bachelor’s degrees from accredited colleges or universities and another $50,000 if they get graduate degrees.
We can set up specialized types of trusts to address your family’s specific situation. For example, you can create a special needs trust for a loved one who has a disability, and a spendthrift trust for one who does not handle money well. You will have peace of mind knowing that you have done all that you could to ensure neither family member is ever destitute.
A will must go through the probate court. Your executor will have to file your will with the court, where it becomes public record. Because of all the required steps, notices and reporting, it can take much longer for assets to get in the hands of your beneficiaries with a will than with a trust.
You Do Not Have to be Rich to Have a Trust
You do not have to be sitting on a million dollars to provide for your loved ones or your estate with a trust. If you have enough money to pay for the life insurance, you can set up an irrevocable life insurance trust. A life insurance policy will usually pay out the proceeds within 30 days of receiving the claim and death certificate. These funds can provide much-needed funds for those left behind who count on your income for their support, and who cannot afford to wait a year or more for their inheritance to go through the probate court.
You Can Give It All to Charity
You can designate that your trust will provide income to you during your lifetime, and that whatever remains when you die will go to your favorite charity. There are some restrictions on this if you have a surviving spouse or have minor children, but we will explain how those rules apply to your situation when we meet with you. Another option is to use a charitable lead trust, which allows you to give some money or assets to charity and give the rest to the people you designate in your trust.
You Can Skip Your Adult Children
You can save on estate taxes if you bypass your adult children and leave your trust assets to your grandchildren or subsequent generations, by using a generation-skipping trust. People often select this type of trust when their adult children are financially successful and would prefer that the money goes to their children.
Take Care of Your Spouse
A marital trust will benefit your surviving spouse. Any remaining assets usually go into your spouse’s estate when he or she dies. If you use a credit shelter trust, you do not lose any of the federal spousal tax exemptions.
Because you have so many options with revocable or irrevocable trusts, these are not DIY projects. With so much at stake, let us advise you on the best options for you and your loved ones.
When to Review Your Estate Plan
Once you get your will or trust (or both) in place, you can relax – for a while. Whenever there is a significant life event such as a death of one of your beneficiaries, the birth or adoption of a child or grandchild, a marriage or divorce, or you or a beneficiary becomes disabled; you should review your estate plan with us. Sometimes just a tweak to your documents can save heartache down the road.
If none of those events have happened in your family for a few years, you should still bring your estate plan in for a “check-up.” The state laws or tax code may have changed, impacting the benefits and advantages of your plan.
When we go through your initial estate planning or your plan review, we will make sure you are fully protected. We will explain how other estate planning documents, like a durable power of attorney for your financial affairs and a healthcare proxy can help you and your family navigate times of crisis.
Experience You Can Trust
Wills and trusts attorney Steve Thienel is skilled in helping ensure that your family is protected so you can enjoy the life you have worked so hard to achieve. Call today to schedule an estate planning consultation.